2)      Proximity delay is how close you can get to the available fiber access points. It is a basic geometric problem. There can only be so much real estate nearby a fiber junction, and locating your equipment in buildings closest to this point lowers the delay, often at a co-location provider’s site.

3)      Transport delay is the amount of latency that is added by any and all optical gear that the data encounters as it is transported along the fiber. In the past, when trade execution times were in the seconds, the transport delay was consider inconsequential. There is a misconception that data travels at the speed of light in a fiber, so there is no real way of speeding it up. In reality, transport delay is a real contributor to path latency, and it can be significantly lowered with a variety of strategies.

The fiber optic link between two financial sites is anything but bare cable. There are several optical transport functions that are needed for one’s data to ride on a fiber: 1) Color conversion, 2) Optical amplification, 3) Dispersion compensation, and 4) Electrical regeneration.

1) The majority of optical transport links today are Wavelength Division Multiplexed (WDM), which means everyone is assigned a color channel. In order to transport one’s data over a WDM network, it must first be converted from grey to a color. This function is called “transponding”. If done incorrectly, milliseconds can be incurred here.

An often overlooked feature of color conversion is “muxponding,” or the aggregation of lower speed traffic into a higher speed signal. For example, today most information feeds are 1Gbit/s, yet most transport links are 10Gbit/s. So, frequently 10 different information feeds are squeezed into a single transport color. The standard way of doing this is ODU encapsulation, which can add double digit microseconds to a link, on each end.

2) A signal traveling down an optical fiber gets smaller and smaller with each kilometer of distance. Optical amplifiers are used to boost the signal as it weakens. Traditionally, a type of optical amplifier called and EDFA (Erbium Doped Fiber Amplifier) is used, and the delay through EDFA’s was considered negligible. However, in today’s trading environment where every nanosecond counts, the hundreds of nanoseconds incurred at each amplifier along a path can no longer be ignored. Some high gain, dual stage EDFA’s can have delays in the low microseconds.

3) Just as rain in the sky, or glass prisms can spread light into a rainbow of colors, so do fiber optic cables. This smearing of an optical data signal into multiple colors is predominately an issue at 10Gbits/s, and can cause a signal’s assigned color to bleed into neighboring channels. This prism effect is called Chromatic Dispersion (CD). Traditionally, long spools of a special type of fiber called Dispersion Compensating Fiber (DCF) has been used to reverse the smearing of colors. However, as these spools can add up to hundreds of additional kilometers of fiber in a path, they are poorly suited to low-latency applications.

My own firm has developed alternative dispersion compensation techniques that remove the need for large spools of DCF – Fiber Bragg Gratings (FBG’s). While a full review of FBG technology is beyond the scope of this article, FBG’s can be thought of as a reverse prism written into a piece of fiber optic cable less than a meter long. They essentially have negligible delay, and greatly reduce the end-to-end latency of a path.

4) Finally, even with the help of optical amplification and dispersion compensation, on longer links a signal will degrade to the point where it needs to be regenerated. How the signal gets regenerated greatly determines the additional path delay incurred. Traditional regeneration techniques can add hundreds of microseconds of unnecessary delay. Now, more than ever, latency is key to financial business models, and every nanosecond counts. This article has but touched on the complex topic of sources of latency in optical transport networks.

To learn more about latency and the wide range of technologies ADVA Optical Networking has developed to speed all optical transport functions, please visit ADVA Optical Networking's low latency landing page here:  http://blog.advaoptical.com/category/fields/low-latency-transport